FTSE CLOSE: Footsie makes modest gains ahead of Christmas break after bumper US growth sends Dow to record high

13.20 (close): A shortened trading session ended with the FTSE 100 up 11.75 points at 6609.9 ahead of the Christmas break, its seventh straight day in positive territory on Christmas Eve.

That left London's top index still more than 300 points below its all-time high after big losses at the start of the month. However, the market has rallied in recent days amid thin festive trading volumes.

Investors were given a lift by bumper US growth figures, which saw the world's biggest economy record annual growth of 5 per cent for the third quarter of 2014. The news pushed the US Dow Jones to a record closing high above 18,000 last night.

Trading trends: Pound under pressure as UK growth disappoints compared to more robust US progress

The pound was little moved against the US dollar today after slipping to its lowest level for 16 months at $1.55, driven lower by downward revisions to recent UK growth figures. Sterling was flat against the euro at €1.27.

Retailer stocks rose after estimates from the Department for Business, Innovation and Skills pointed to a record year for the UK high street, with sales forecast to reach around £342billion.

The figures, which come amid signs of a strong festive period for retailers, helped beleaguered supermarket stock Tesco rise by 1.4p to 186p. Rival Morrisons was 1.3p higher at 181.7p.

Other risers included oil giant BP, which was up by a penny at 416.85p, and broadcaster ITV with a gain of 2.1p to 216.2p.

The biggest faller was FTSE 100 newcomer Indivior as some of the excitement surrounding its strong market debut began to fade.

The pharmaceuticals business, which focuses on drugs to fight alcohol and cocaine addiction, surged 25 per cent on the first day of trading since its split from Reckitt Benckiser. The stock was down 3 per cent or 5p to 145p today.

Smith & Nephew rose 84p to 1173p on reports that US rival Stryker is planning a takeover bid.

Chris Beauchamp, market analyst at IG said:‘Last night’s record highs in the US were greeted with cheers, but Dow watchers should be concerned that the Transportation index is still lagging behind, providing one sour note in an otherwise cheery prospect for year end.

‘Light volumes should provide an opportunity for another push higher, as the prospect of a third day of record highs is too tempting to pass up, especially given the shortened session in the US. Ahead of the open, we expect the Dow to open around 20 points higher.‘

US investors will have the latest weekly jobless claims numbers to digest at 1.30pm. Claims are expected to have risen just 1,000 to 290,000 in the week to December 20.

09.30: The Footsie held on to some modest gains as the shortened Christmas Eve trading session progressed, with the festive rally maintained by the fresh record high overnight on Wall Street in the wake of bumper US growth figures yesterday.

Approaching mid morning, the FTSE 100 index was up 8.4 points at 6,606.6 in thin volume ahead of the festive break, with London trading set to finish at 12.30 pm today.

The UK blue chip index is still more than 300 points short of its own all-time high after big losses at the start of this month saw the benchmark beat a retreat from its assault on that peak.

On Wall Street, the Dow Jones Industrial Average closed above the 18,000 barrier for the first time last night after the world's biggest economy recorded annual growth of 5 per cent for the third quarter of the year.

Connor Campbell, financial analyst at Spreadex said: ‘As the US is the only real recipient of economic news today, all the Dow has to do is weather US unemployment claims this afternoon to enter Christmas Day on an impressive high.

‘This prolonged display of health, and more impressively, the US markets’ ability to recover from its oil-inspired slump appear to guarantee that the US Federal Reserve will raise interest rates in the New Year.’

There was an early Christmas present for investors in UK blue chip Smith & Nephew, shares in which jumped 8 per cent higher after Bloomberg reported revived speculation that US orthopaedics devices peer Stryker is planning a takeover bid for the knee and hip replacement firm.

The news agency suggested that an offer may come in the next few weeks, with Stryker planning to offer a significant premium, likely to be about 30 per cent to Smith & Nephew's current share price. Smith & Nephew shares gained 91.5p at 1,180.5p.

Tony Cross, market analyst at Trustnet Direct said: ‘These latest gains have propelled the stock to one of the best performers in the FTSE 100 this year, although that does mean failure to see the deal progress comes with some impressive downside, too.

‘If nothing else, this offers at least a degree of excitement in what could otherwise be a somewhat uninspiring session.’

Defence firm BAE Systems also found gains, adding 1,3p at 474.6p after it said it was awarded a contract worth up to $1.2billion from the US Army for Armored Multi-Purpose Vehicles.

Other risers included oil giant BP, up 5.7p to 421.5p after Russia’s Kommersant business daily reported that the company is close to a deal with its Russian partner, state oil company Rosneft, for a new project that would expand its commitments in the country despite Western sanctions.

The biggest faller was FTSE 100 newcomer Indivior after shares rose 25 per cent yesterday in the wake of its split from Reckitt Benckiser.

The pharmaceuticals business, which focuses on drugs to fight alcohol and cocaine addiction, fell 4 per cent or 6p to 144p.

Among the small caps, Chariot Oil & Gas saw its shares soar 23 per cent, 1.85p higher to 9.75p after the Moroccan authorities approved its farm-out of a 25 per cent interest in the Rabat Deep Offshore licence to Australia’s Woodside, for which it has already received the majority of the funds.

But Hardy Oil and Gas dropped 23 per cent, falling 18.75p to 64.50p after it agreed to relinquish the KG-DWN-2003/1 exploration licence in the Krishna-Godavari Basin in India, leading to a $22.0million write down in its current financial year.

And Deltex Medical shares plunged over 30 per cent, dropping 2.25p to 4.875p after it said it expects its full year sales to fall below market expectations if some transactions are not completed before the end of the year.

The medical equipment firm also announced it has signed an agreement for 60 monitors from NHS Supply Chain, a logistics provider to the National Health Service.

08.30: The FTSE 100 has opened 4.1 points higher at 6,602.2 after the Dow Jones ploughed through 18,000 for the first time and finished at a new record high last night.

The Wall Street rally was sparked by unexpectedly strong US GDP growth, helping investors head into the Christmas holidays in a more relaxed mood after the global market turbulence of the past two weeks.

Risk appetite was sharpened by revised data showing the US economy expanded at an annual rate of 5 per cent in the third quarter, the quickest pace in 11 years and the strongest sign yet that growth has decisively shifted into higher gear. Read more here.

Wall Street rally: US economy expanded at an annual rate of 5 per cent in the third quarter, the quickest pace in 11 years

BP will be in focus today after Kommersant business daily reported that the company is close to a deal with its Russian partner, state oil company Rosneft, for a new project that would expand its commitments in the country despite Western sanctions. The oil giant's shares opened 5.18p higher at 421.03p.

However, energy stocks could come under renewed pressure as Brent crude traded at around $61 per barrel, giving up some of the previous session's gains.

Jasper Lawler, market analyst at CMC Markets, said: 'The Dow Jones in the US managed its first close above 18,000 with a week to go until the end of 2014 and that momentum appears to be propelling European markets towards a slightly higher open this morning.

'US GDP came in at a tidy 5 per cent clip in the third quarter, all the more impressive when compared with lower revisions to UK growth and recession in many parts of Europe.

'It’s not hard to see why the pound and euro both broke to fresh multi-year lows against the US dollar on Tuesday and could be expected to continue to do so heading into next year.

'In 2015 the dollar is set to benefit from accelerating US growth aided by falling oil prices but the pound faces political uncertainty over the general election in May and the euro is looking at the prospect of further devaluation through ECB balance sheet expansion.'

The FTSE 100 closed 21.44 points higher at 6598.18 yesterday. The London stock market will close at 12.30pm today for the Christmas break.